Hunton Retail Law Resource

While the eleven January recalls are summarized below, this first “Roundup” focuses on the evolving use of cashierless technology and what role it may play in the context of product recalls.  Broadly speaking, cashierless technology refers to using technology at brick-and-mortar business locations that allows shoppers to enter the location and purchase consumer products without standing in a checkout line or interacting with a cashier.  Rather, cameras and sensors track the products selected and charge the shoppers upon exit.

In the near term, cashierless technology introduces an opportunity to provide a more targeted and, therefore, more effective warnings to customers about recalled products.  Ultimately, cashierless technology can also be expected to shrink the amount of time between when the need for the recall is identified and the delivery of a warning that could help stop the sale of the recalled product until it can be removed from the retail shelves and the supply chain.

Product recalls and withdrawals are conducted to minimize (if not prevent) a suspected hazardous product from reaching the consumer and to warn consumers of the hazard in a manner that prevents use or consumption.  To this end, recalls and withdrawals may satisfy potentially applicable statutes and regulations and mitigate risks associated with product liability claims.  The most likely (though not exclusive) legal requirements fall under the authority of the U.S. Food and Drug Administration (FDA) and the Consumer Product Safety Commission (CPSC).  Product recalls and withdrawals can be mandated by a regulating agency such as the FDA or CPSC or voluntarily implemented by a participant in the product supply chain.  These processes are driven by the severity of the risk identified.  The recall strategy, which addresses the depth of recall, need for public warnings, and extent of effectiveness checks for the recall, will depend on the severity of the risk it seeks to address.

The CPSC’s Recall Handbook that it “is rare that any two recall programs will ever be identical” and lists the issues that recalling companies should be prepared to address.  One of those issues is whether the recalling company “notified retailers to stop selling the product” and how they “asked them to help identify consumers who own the product.”

Any gap in time between a recall announcement and pulling a product from the shelf presents some risk that recalled products could be sold in violation of federal laws such as the Food, Drug, and Cosmetic Act or the Consumer Product Safety Act.  Time gaps may also increase a products liability risk for selling defective products if harmed consumers cite the failure to timely stop sale or effectively warn of the danger in support of a liability claim.

Getting recalled products off retail shelves and out of the supply chain before purchase is the most effective mitigant against risks associated with the recalled product.  However, even a well-executed recall involves some practical delay between the time when (i) the potential need for a recall is identified and (ii) when notice is provided throughout the supply chain, including the point of sale.  The faster the product is removed from the supply chain and pulled from the shelf, the less number of consumers could walk out the door with the recalled product.  Before the product is removed from the shelf, many current checkout/cashier systems can be programmed to recognize an impacted product and deliver a “stop sale” message to prevent a consumer from walking out the door with the affected product, which is the most effective way to mitigate against risk of harm.

In theory, cashierless checkout technology has the potential to instantly recognize when a customer removes a recalled product from the shelf or the store and ultimately may be used to deliver “stop sale” messages to digital displays on the shelves or on a device to timely warn against purchase.  However, still in its nascent stages, cashierless checkout technology in beta stages may not yet deliver such instantaneous notifications.  There may be time lags to process the information on movement of the product in which the time lag may extend past the time when the customer takes the product from the shelf or exits the store with the product.

For consumers who obtain an affected product before sale can be stopped, the next best option is to deliver timely and effective notice to stop use or consumption of the product or otherwise mitigate the risk of harm.  As the Recall Handbook states, the CPSC “encourages companies to be creative in developing ways to reach owners of recalled products and motivate them to respond.”  A survey conducted by Stericycle Expert Solutions (August 23–25, 2017) found that “personal relevance—or lack thereof—was a key driver of recall non-compliance.  Approximately 70 percent of respondents said they judge recall notices based on whether they think they are personally at risk.”

For a product that has already left the shelf and made it into a consumer’s hands, recall campaigns generally rely on generalized messaging—e.g., through CPSC websites, press releases, advertisements, posters, store signs—that asks consumers to determine if they have purchased a recalled product.  The research says this misses the “personally relevant” mark, especially for millennials who tend to ignore such generalized warnings.  Because cashierless checkout technology can track a customer’s specific purchases, it has the potential to connect a specific recalled product to an actual purchaser and deliver targeted, personally relevant warnings to known purchasers.

Because preventing or stopping a sale is the most effective mitigant against risk, retailers should continue efforts to timely “stop sale” at checkout.  To the extent that cashierless technology disrupts current stop sale measures, that risk may not be material if retailers can quickly remove product from the self or find another alternative to prevent product removal.  Although it is a violation to sell recalled products, a vast majority of the time both the FDA and CPSC work to achieve voluntary reporting and recall compliance.  Accordingly, it is likely that either agency would assess a recall plan on the merits of its overall timeliness and effectiveness and credit the potential benefits of more targeted and effective warnings.

Turning back to January’s specific recall activity, the CPSC issued two warnings to consumers in January about lithium-ion batteries and all-terrain vehicles (ATVs).  The agency warned consumers not to buy or use loose 18650 lithium-ion batteries.  These batteries are manufactured as industrial component parts of battery backs and are not intended for individual sale to consumers.  However, the CPSC learned that the batteries were being separated, rewrapped, and sold to consumers as new batteries on the Internet.  The loose batteries can overheat and pose a risk of fires, burns, and explosions to consumers without proper protection and installation into the devices in which they are used.  The CPSC also warned consumers to stop using a certain brand of youth ATVs due to crash hazards and violation of a mandatory safety standard.  The ATVs are targeted for use by children under 10 years old yet they do not comply with mandatory maximum speed limitations, thus posing a serious risk of a high-speed crash.

Total Recalls: 11

Hazards:  Fire/Burn/Shock (4); Injury (2); Tip-Over (2); Fall (1); Choke (1); Violation of Federal Standard (1)